FHA Lenders With No Overlays In California On FHA Loans

This Article Is FHA Lenders With No Overlays In California On FHA Loans

California has the most high-cost counties in the nation. The housing market in California is stronger than ever after the recovery of the coronavirus pandemic. The average California home price is $657,500 which is almost double the national average home price of $380,000. California has the most counties that are classified as high-cost counties than any other state in the nation. A large percentage of home mortgages in California are high-balance loans. Both HUD and the Federal Housing Finance Agency (FHFA) have been increasing the FHA and conforming loan limits for the past six years due to skyrocketing home prices. Home prices in California have been skyrocketing where many home buyers are getting priced out of the housing market. Both HUD and the Federal Housing Finance Agency (FHFA) realize this and have been increasing both the FHA and Conforming loan limits on FHA and Conventional loans for the past six years. We will be discussing and covering buying a home in California and the importance of understanding FHA lenders with no overlays in California on FHA loans.

HUD And The FHFA Increase FHA And Conforming Loan Limits For Six Years In A Row Due To Skyrocketing Home Prices

HUD just increased the 2022 FHA loan limit in standard areas of the United States to $420,680. This is a $60,000 increase over the 2021 $356,362 FHA loan limit. High-Balance FHA loan limits in high-cost counties throughout the state of California are $970,800. The conforming loan limit for standard areas in the nation for 2022 is $647,200. The conforming loan limit for 2022 was a substantial increase of $98,950 from the 2021 conforming loan limit of $548,250.

High-Balance FHA And Conforming Loans In California Explained

High-balance loans are FHA and/or conventional loans in high-cost counties that exceed the traditional FHA and Conforming loan limits. Conforming loan limit in high-cost areas for 2022 on a single-family home is $970,800 which is a substantial increase from the 2021 high-balance conforming loan limit of $822,375. The Federal Housing Agency has been increasing FHA and Conforming loan limits for the past six years due to skyrocketing home prices in California as well as the rest of the country. FHA loans are the most popular loan program in California for first-time homebuyers, borrowers with prior bad credit, borrowers with large outstanding collections and/or charged-off accounts, homebuyers with credit scores down to 500 FICO, borrowers with high debt to income ratio, and homebuyers with prior credit/income issues.

California HUD Agency FHA Loan Requirements Versus Lender Overlays By Mortgage Lenders

There are two different types of mortgage guidelines. The first guideline is the agency mortgage guidelines of HUD. All lenders need to have borrowers meet the minimum HUD agency mortgage guidelines if they want the FHA loans they originate and fund to be insured by HUD.  HUD is the parent of FHA. HUD is a federal government agency in charge of insuring mortgage lenders that are HUD-approved on FHA loans the lenders originate and fund in the event the borrower defaults and/or forecloses on their FHA loans. HUD does not originate, process, underwrite, fund, service FHA loans. Banks, credit unions, and mortgage companies that are HUD-approved originate and fund FHA loans. Due to the government guarantee from HUD, lenders love to originate and fund FHA loans for homebuyers with low down payments, credit scores down to 500 FICO, less than perfect credit, lenient mortgage requirements, at competitive mortgage rates.

Additional FHA Loan Requirements That Surpasses HUD Agency Mortgage Guidelines: Lender Overlays

The second type of lending guidelines are lender overlays. Overlays are additional lending requirements by individual lenders that are above and beyond the minimum agency mortgage guidelines of HUD. Lender overlays are optional. Most lenders have lender overlays on high-balance FHA, VA, USDA, and conventional loans. Each lender can have its own lender overlays. Mortgage companies can have lender overlays on just about anything. Typical lender overlays are lenders requiring a higher credit score requirement and lower debt to income ratio caps than the minimum agency HUD mortgage guidelines.

Mortgage Loan Denial Due To Lender Overlays

Just because one lender denies a borrower due to higher lending requirements than HUD’s agency guidelines, borrowers can go to a different lender with no lender overlays. This is why it is important to understand the basic HUD agency guidelines. We will detail the typical common lender overlays lenders in California will impose. The great news is there are California FHA lenders with no overlays on FHA loans. FHA Lenders With No Overlays In California On FHA Loans are mortgage companies like Gustan Cho Associates. Gustan Cho Associates has no lender overlays on government and conventional loans.

n this article, we will discuss and cover choosing FHA lenders with no overlays in California. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. We are licensed in California and a large percentage of our loans are high-balance loans.

The Strong California Housing Market And Skyrocketinb Home Prices 

California has one of the largest states in the nation. California also has one of the highest housing prices in the U.S. Average home values in California are almost double the national average of $380,000. With more demand for housing than supply, prices of housing in California keep on increasing year after year. Many banks and lenders in California have overlays. Not all mortgage lenders have the same mortgage guidelines.

What Are Lender Overlays By Mortgage Companies On Government And Conventional Loans

Overlays are mortgage guidelines imposed by lenders on top of the minimum lending guidelines by FHA, VA, USDA, FANNIE MAE, AND FREDDIE MAC. With FHA Loans, HUD sets guidelines with regards to minimum mortgage loan requirements. In order for HUD to insure defaulted FHA Loans, lenders need to meet HUD Guidelines.

In this article, we will cover and discuss qualifying with a lender with no overlays.

California FHA Loan Requirements And Guidelines

For example here are minimum FHA minimum lending guidelines:

Minimum credit scores of 580 for 3.5% down payment home purchase loan. Maximum debt to income ratios for borrowers with 620 credit scores or higher is 56.9% to get AUS Approval. Debt to income ratios of borrowers under 620 credit scores is 43% to get an approve/eligible per Automated Underwriting System Findings. 100% of the down payment can be gifted.

FHA Lenders With No Overlays In California On Collection & Charge Offs

Unpaid collection accounts are okay as long as the aggregate amount is under $2,000. If unpaid collection accounts are over $2,000, then 5% of the unpaid collection balance will be used to calculate the borrower’s debt to income ratios. The borrower does not have to make any payments, but 5% of the unpaid debt is just used for income qualification purposes in the event if the unpaid collection account turns into a judgment. Medical collections are exempt.

California FHA Loan Requirements On Judgments And Tax Liens

Judgments And Tax Liens:

Tax Liens are acceptable on FHA loans. This only holds true as long as the borrower has a written payment agreement with the Internal Revenue Service. Three months of canceled checks and/or bank statements need to be provided on FHA loans. You can qualify for a conventional loan with outstanding tax debts. However, you cannot have an outstanding tax lien. You can owe the IRS tax debts but need to enter into a written payment agreement and make one payment per the monthly payment agreement prior to closing. You can qualify for a mortgage with outstanding judgments. You need to have a written payment agreement with the judgment creditor and make three timely monthly payments.

Examples Of Mortgage Lender Overlays On FHA Loans

California home buyers who are told they do not qualify for a home loan may not qualify due to overlays and not because they do not qualify for a home loan in California. Most California mortgage companies have overlays more so than lenders in other states.

Again, overlays are additional guidelines set by the individual lenders that are beyond the minimum overlays set by government agencies such as:

• FHA
• VA
• USDA
• FANNIE MAE
• FREDDIE MAC

Typical Overlays By California FHA Lenders

Most lenders have lender overlays. Overlays are additional lending requirements that are above and beyond the minimum agency mortgage guidelines of HUD, VA, USDA, Fannie Mae, Freddie Mac. FHA loans minimum credit score requirements are 580 credit scores for a 3.5% down payment FHA loans. Many California lenders have credit score overlays where their minimum credit score requirement for FHA loans may be 640. Some are higher while others can do FHA loans with 620. A California mortgage lender with no overlays on FHA Loans only requires a credit score of 580 scores.

FHA Loan Requirements On Debt To Income Ratio Versus Lender Overlays By Mortgage Companies

Maximum debt to income ratios for FHA lenders with no overlays is 56.9% for borrowers with 620 credit scores or higher. However, many California FHA mortgage lenders have a debt to income ratios overlays where the maximum debt-to-income ratios are capped at 45%. Some California FHA mortgage lenders with debt to income ratio overlays will go up to 50% debt to income ratios. California borrowers with high debt to income ratios need to choose a California mortgage lender with no overlays on debt to income ratios that can get up to a 56.9% debt to income ratio for an AUS approval. Paying off unpaid collection accounts is not required per FHA lending guidelines. However, many California mortgage lenders will not qualify any mortgage applicants with outstanding collection accounts until all collection accounts have been paid off. Borrowers with outstanding unpaid collection accounts need to Choose a California mortgage lender with no overlays on unpaid collection accounts.

Qualifying For An FHA Loan In California With Outstanding Judgments

Judgments:

• HUD does not require you to pay off judgment in full
• HUD will allow you to enter into a written payment plan with a judgment creditor
• As long as the judgment debtor has been making at least three payments and can show three canceled checks, they will qualify for an FHA loan

Many California mortgage lenders have overlays on judgments where judgment debtors need to have the judgment paid off in full before qualifying for a California FHA loan.

FHA Lenders With No Overlays In California On FHA Loans

Home Buyers who are looking for FHA lenders with no overlays in California can contact us at Gustan Cho Associates.  Gustan Cho Associates is a no-lender overlay California mortgage company specializing in FHA, USDA, Conventional, and non-QM loans.  All of our government and conventional mortgage loan programs in California do not have any lender overlays. We just go off DU FINDINGS and/or LP FINDINGS.  Our team of licensed mortgage loan originators and support/operations staff in California is available 7 days a week to assist borrowers. Our licensed loan officers are available 7 days a week, including late evenings, weekends, and holidays to issue pre-approvals.  Please contact us at Gustan Cho Associates at gcho@gustancho.com or call us at 800-900-8569. Text us for a faster response.  Over 75% of our borrowers are home loan applicants who were told they do not qualify due to their lender overlays.  We specialize in home loans with bad credit in California.  If you are seeking FHA lenders with no overlays in California, contact us today.